Money Matters

16 March is pension decision day for doctors

March 16th is looming over the medical sector but thousands of doctors and healthcare professionals still do not realise its significance. However, if those affected fail to properly prepare their finances and consider potential pension options there could be dramatic consequences in retirement.

Many doctors, particularly those aged between 45 and 55, remain unaware that they face a critical decision regarding which NHS pension scheme they should remain with. They may have been under the impression that their NHS pension was one of the few financial matters they did not have to be concerned with but the opposite is now true.

Many doctors remain oblivious to the fact that after April 1st their retirement age, income and scheme itself will be irreversibly altered and that their last chance to influence this is March 16th.

There are currently two NHS pension schemes; 1995 and 2008 but from April 1st there will be a third, 2015 scheme. A key difference between the various schemes is the age of retirement: the 1995 scheme allows retirement at 60 and the 2008 scheme places it at 65.

Crucially however, under the mandated scheme for those under 50 on April 1st 2012, the 2015 scheme will only allow its associated retirement benefits to be claimed in line with state pension age and not before.

The financial implications for doctors and medical consultants following this alteration are seemingly being underestimated by most within the healthcare industry. It will particularly come as a shock to those in their early fifties who may suddenly find their expected working life remaining has doubled.

There are further complications for those, in the 1995 scheme, who had planned to begin taking the benefits of their retirement package at age 60. Should a beneficiary of the scheme begin claiming these, and wish to continue working for the NHS, they will be unable to continue funding any NHS pension scheme.

People in these circumstances would have to finance other retirement vehicles such as private pensions or ISAs instead.

The 2015 scheme does however offer some benefits; It has a much faster defined benefit accrual rate of 1/54 of your pensionable pay which is better than the 1995 and 2008 schemes, standing at 1/80 and 1/60 respectively.

Ultimately, the choice surrounding which scheme to be associated with is highly individual and depends on where the person wishes to be, financially and professionally, at various stages in their life. Unfortunately, many doctors are not realising the ramifications of this decision and are therefore not addressing the issue. We would encourage anyone who thinks they may be affected to review their financial position and act now before it is too late.

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